The sharing economy

Companies should not ignore the sharing economy. As brands adapt their offerings to the managed travel market, barriers to use in the managed travel are coming down.

Sharing economy services are likely to gain in popularity. This is just the beginning.

In barely half a decade, the sharing economy has made a deep impact on the lodging and ground transportation industries, while revolutionizing users' habits. With its motto "access trumps ownership," the sharing economy refers to individuals renting things they need from other individuals through technology-based networks that facilitate transactions. New forms of rental are springing up in all kinds of areas, from bedrooms and cars to garage space and accommodation for pets. This is not a fad but a robust trend that is transforming society and business models, much like Facebook and Twitter before it.

Figure 27: Examples of sharing economy players and offers

Among the most well-known, Airbnb (founded in 2008) is now valued at $15 billion to $20 billion depending on the sources, while Uber (founded in 2009) is estimated at $40 billion to $50 billion, making it one of the 150 largest companies in the world.13 Given their more mature business offerings, these two companies are the primary focus of this section.

Figure 28: Airbnb and Uber highlights

Whether they like it or not, companies should be mindful that corporate travelers are probably already using these services. According to Fortune Magazine, the number of transactions captured by one large expense management company in its expense reporting tool multiplied by five for Uber taxi services and by 27 for Airbnb rentals over a year.14 All the signs lead to further growth in managed travel, particularly in ground transportation. According to our survey, 43 percent of travel managers consider the sharing economy an important trend in this area, and 31 percent for sharing economy accommodations.

Figure 29: Importance of the sharing economy to travel managers in ground transportation and accommodation (respondents rating the trend 3 or higher)

As could be expected, the use of sharing economy services is higher among millennials or "Generation Y" travelers, born between 1980 and the mid-2000s. Twice as many of these travelers have used sharing economy services for business travel, and more have used them for ground transportation than for accommodation.

Figure 30: Comparison of Airbnb and Uber usage by millennials vs. non millennials

A number of factors are driving this growth. In particular:

  • Cost. It is no coincidence this business model sprang up during the global economic crisis, offering new revenue streams to sellers and often cheaper services to buyers. While the economy has now turned the corner, the cost focus of recent years has left a durable trace.
  • Supply and demand dynamics. Airbnb started up in the San Francisco market, where accommodation is notoriously in short supply. Similarly, the idea for Uber is said to have come to its Silicon Valley founder as he was trying to find a taxi in Paris rush hour.
  • Convenience. Technology and social media have provided a catalyst for the sharing economy. Uber's location-based app allows users to order an immediate pick-up from a simple mobile app, while both passengers and drivers can leave ratings on their experience to share with others. In comparison, competing apps launched by traditional taxi services have not always been well received in terms of user-friendliness.
  • A custom experience. As discussed earlier (Pages 23-39), users expect increasingly customized experiences, whether in terms of technology interfaces or the actual products and services offered. Although the more personal "home-from-home" Airbnb experience is not necessarily a key selling point for business people who want convenience above all,15 we should not forget the growing "bleisure" (business + leisure) travel trend.
  • Tailored business offerings. The major sharing economy brands have taken note of the managed travel niche and are starting to tailor their offerings.

Sharing economy brands are adapting their offerings to managed travel

A number of new features are making it easier for companies to integrate sharing economy options into their programs, based around billing, reporting and expense management:

  • Direct billing. For example, Uber for Business offers direct billing, along with different electronic payment methods.
  • Reporting data. Both Uber and Airbnb offer access to spending data, and Uber offers full details on individual trips.
  • Integrated expense management. Concur's TripLink solution enables travelers to book Airbnb properties directly and have their expense reports pre-populated with basic data.
  • Integration with airlines. Uber has partnered with companies such as United Airlines so that travelers may book ground transportation within the same app. While this does not necessarily help keep travelers within a managed travel booking environment, we can imagine greater integration with managed bookings in the future.

Figure 31: Uber and Airbnb offerings for business travelers

While legitimate, safety and security concerns should be put into perspective

One of the biggest barriers to more widespread adoption by business travelers is the perception that safety and security risks may be higher in the sharing economy than classic travel solutions. This is the primary concern for surveyed travelers who have tried sharing economy travel solutions.

This concern is even more marked among travel managers.

Figure 32: Travelers' concerns over sharing economy providers

Figure 33: Travel managers' concerns about sharing economy

These concerns are legitimate when the market is used to certain assurances from established brands and the media has publicized incidents ranging from road accidents to fraudulent requests for payment and credit card billing errors. A number of legal battles have also drawn negative coverage.

However, these issues should be put into perspective. Each sharing economy brand has its advantages and disadvantages (see Figures 34-35) but providers and legislators are working to reassure people and offset the risks.

In particular:

  • Around the world, local laws have been passed on car sharing, placing the responsibility for insurance on the shoulders of brands and their insurers.
  • The sharing economy model enables users and providers to share ratings and information on their experiences as a way to self-regulate.
  • Brands also provide guidelines to users to help them avoid fraud, while tackling reported complaints efficiently to exclude offenders.

Figure 34: Uber benefits and considerations for corporate travelers and travel managers

Figure 35: Airbnb benefits and considerations for corporate travelers and travel managers

As the available offerings develop, whether or not companies are comfortable integrating sharing economy offerings into their programs ultimately depends on their culture. More traditional, risk-averse companies may decide that the risks outweigh the benefits, while others have already embraced the trend.

Case Study

Global company opens up its travel program to alternative lodgings

A large technology company noticed from its expense data that a small but growing percentage of its travelers were using Airbnb-type alternatives to hotels. Usage was particularly concentrated on San Francisco, London, New York and other high-occupancy markets where room availability can be a challenge. Travelers clearly saw sharing economy accommodation options as appropriate for their needs, so the company wanted to explore whether it should formally offer this option to them.

Safety and security appeared to be the main barrier to including these types of suppliers in the travel program. After carefully weighing the pros and cons, the company decided that many of the perceived risks (e.g. hotel security breaches) were also present with existing suppliers. It worked with Airbnb to capture booking data and feed it to International SOS for tracking purposes to enhance the level of assurance provided.

As a result, the company updated its policy to include Airbnb as an option, communicating the change to employees in the spring of 2014 via a company group travel page. While Airbnb still accounts for a fairly low percentage of the company's total hotel spend (typically less than 1 percent), employees benefit from additional lodging choices when they travel.

Tips and considerations

Since the sharing economy cannot be ignored, companies need to make sure they are asking the right questions:

  • How often are our travelers using sharing economy sites/apps and in which markets?
  • Is the level of spend enough to impact our volume commitments with preferred hotels or ground transportation suppliers?
  • Is our corporate culture amenable to offering this kind of alternative option to travelers?
  • If so, which providers meet our requirements in terms of quality, safety and security, reporting and legal compliance? What is their liability if an incident occurs?
  • Should our travel policy be updated to make our position on sharing economy providers clear?
  • What are the logical uses for different providers?
    • Uber/other ride-sharing services: as an exceptional or everyday alternative to current ground transportation options (taxis/limousines)?
    • Airbnb: as an alternative to hotels in specific circumstances:
      • Extended stays (cheaper alternative to extended stay hotels)?
      • Apartment/house sharing (e.g. turnkey, longer-term projects in remote locations)?
      • To lower costs and secure availability in specific locations (e.g. San Francisco and New York)
      • To combine business + leisure (e.g. staying the weekend following a business trip)?
  • What kind of support can we get from our TMC and other partners?

CWT can help companies to tackle this issue in a variety of ways. For example, CWT Solutions Group has created data-matching models to provide visibility on how an organization's travelers are using sharing economy suppliers and how much they are spending, before identifying opportunities to integrate selected suppliers into the travel program. CWT can also provide support with tracking booking data (e.g. through the CWT To Go app), improving program performance (e.g. through CWT AnalytIQs) and updating travel policies.

13 Source: TIME Magazine, "Baby you can drive my car and stay in my guest room. And do my errands and rent my stuff. My wild ride through the new on-demand economy" (July 2014)
14 Source: Fortune Magazine, "Uber and Airbnb are complicating corporate expense reports" (July 29, 2014)
15 Source: A CWT survey in Room for savings: optimizing hotel spend (2009) showed that a convenient location ranks above all other features for travelers choosing a hotel. Similarly, convenience is the most important feature of booking tools for travelers.

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